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Donors Have No Idea What You Do With Their Money

Finance

How loyal is the average donor?

Not very, it seems.

“In many large national programs fueled by direct mail,” Mal Warwick observed in 2005, “no more than 25-35% of newly acquired donors ever give so much as a second gift.”

And that was then. These numbers never go up; they always get worse. A 2012 report from the Direct Marketing Association found that response rates to direct mail had dropped “nearly 25%” over the past nine years.

Donors Have No Idea What You Do With Their Money image GiftIt’s relatively easy to get a first gift. It’s consistently hard to get a second gift, especially during a worldwide economic downturn that leaves everyone feeling poorer.

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There’s more bad news. “Public confidence in charitable organizations … continues to stagnate and shows no signs of recovering [from a 2001 decline], according to … the Brookings Institution,” the Chronicle of Philanthropy reported in September 2004.

Only 11% of Americans thought charities did a “very good” job of spending money, said Brookings. The other 89% had their doubts. In fact, more than one-quarter of Americans in 2004 believed charities were inept at managing money, according to the report.

And that was before the Great Recession made everyone grumpy. As I said, these numbers never get better.

Be Aware: Charities Are Guilty Until Proven Innocent

Part of the problem is the name, I suppose. We call ourselves “nonprofits.”

And what does that label say subliminally to the layperson? That we really don’t care about money.

UK researchers once asked donors to guess, “What percentage of your gift does your favorite charity spend on its fundraising activities, rather than on programs?”

Prepare yourself.

Donors – yes, donors – believed that most of their gift – fully 65% – never went into the field. It was instead plowed back into fundraising and related overhead, leaving only a small share – a mere 35% – for changing the world.

And yet they still gave.

Imagine how much more they might have given had they only known the truth.

Prime Messaging Opportunity

Of course you’re protesting: “That’s so unfair! We pour almost everything we’re given directly into programs. We spend as little as possible on fundraising.”

You know that. I know that. But your donors don’t know that.

You have to remind them of your organization’s dedication to transparency, accountability, and financial health frequently … on your website, in your direct mail, in your face-to-face solicitations, and in every issue of your newsletter.

Go ahead, check right now. I’ll wait.

Bruce Campbell, a pioneering researcher into donor attitudes and behavior, found that “information regarding how finances are used” was among donors’ top concerns. They wonder: “Did you spend my money on paper clips and business lunches? Or did you really use my gift to change the world?”

Don’t leave your donors guessing on this point. They will guess wrong…and not in your favor.

One real reason renewal rates, retention rates, and long-term loyalty stubbornly remain so abysmally low is because donor skepticism has been left to fester.

What an opportunity…

How You Can Win

I teach that “the charities with the best ‘thank you’s’ win.” But it’s the same with trust: the charities that establish amongst their donors a strong sense of trustworthiness will win in the long run.

This post originally appeared in the Ahern Donor Communications newsletter.

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